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Inertia by Donald Dorsey

Appeared in the September 95 issue of Stocks &Commodities magazine
The Inertia indicator was developed by Donald Dorsey. It was originally introduced in theSeptember1995 issue of Technical Analysis of Stocks and Commodities magazine.

It is an outgrowth of Dorsey's Relative Volatility Index (see Relative Volatility Index). Dorsey chose the name "Inertia" because of his definition of a trend. He asserts that a trend is simply the ý˙outward result of inertia. It takes significantly more energy for a market to reverse direction than to continue along the same path. Therefore a trend is a measurement of marketinertia.

In physics, Inertia is defined in terms of massand direction of motion. Using technical analysis to analyze securityprices, the direction of motion is easily defined. However, mass is not so easily defined. Dorseyasserts that ý˙volatilityý˙ may be the simplest and most accurate measurement of inertia. This theory led him to use the Relative Volatility Index (RVI) as the basis for a trend indicator. Inertia issimply a smoothed RVI. The smoothing mechanism is a Linear Regression indicator (see Linear Regression Indicator). The RVI helps measure the general direction of volatility. Dorsey found that by smoothing the RVI, a good long-term trend indicator resulted.

If the Inertia indicator is above 50, positive inertia is indicated.
The long-term trend is up and should remain upas longas the indicator is above 50. If the Inertia indicator is below 50, negative inertia is indicated. The long-termtrend is down and should remain down as long as the indicator is below 50.

New Relative Volatility Index

(100 * Mov( If(HIGH > Ref(HIGH,-1),Std(HIGH,10),0),14,E) /
(Mov( If(HIGH > Ref(HIGH,-1), Std(HIGH,10),0),14,E) +
Mov(If(HIGH < Ref(HIGH,-1), Std(HIGH,10),0),14,E)) +
100 * Mov( If(LOW > Ref(LOW,-1), Std(LOW,10),0),14,E) /
(Mov( If(LOW > Ref(LOW,-1), Std(LOW,10), 0),14,E)+
Mov(If(LOW < Ref(LOW,-1), Std(LOW,10),0),14,E))) / 2 Inertia

Mov( Fml( "New Relative Volatility Index" ),20,SIMPLE)


Inertia 2 in 1

Mov( ((100 * Mov( If(HIGH > Ref(HIGH,-1), Std(HIGH,10),0),14,E) /
(Mov( If(HIGH > Ref(HIGH,-1), Std(HIGH,10), 0),14,E)+
Mov(If(HIGH < Ref(HIGH,-1), Std(HIGH,10),0),14,E)) +
100 * Mov( If(LOW > Ref(LOW,-1), Std(LOW,10),0),14,E) /
(Mov( If(LOW > Ref(LOW,-1), Std(LOW,10), 0),14,E)+
Mov(If(LOW < Ref(LOW,-1), Std(LOW,10), 0),14,E)))/ 2),20,SIMPLE)

 

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